Profitability determinants of hotel companies in selected Mediterranean countries

Abstract

Tourism is one of the most important industries in the Mediterranean countries, which strongly contributes to the economic activity, capital investment and job creation. Therefore, the purpose of this paper is to examine the determinants influencing profitability of hotel companies in selected Mediterranean countries. Thereby, dynamic panel data models are estimated on an extensive dataset for the period from 2007 to 2015. The paper provides evidence on differences among internal profitability determinants of hotel companies operating in tourism competitive countries. The results indicate that the cash flow to operating revenue has a statistically significant and positive impact on profitability in all observed countries. The total asset turnover ratio is significant for all countries except Portugal, while labour productivity is significant only for Spain, which is also the country with the highest turnover per employee. The solvency ratio is positively related to profitability, except for Greece as the most indebted country. Size proved to be significant for hotels in Spain and Portugal, while age is the variable by which the countries mostly differ, as findings show a different impact of underlying variable on hotel profitability. Findings provide information to shareholders that would ensure profitability of hotel companies operating in different countries. ARTICLE HISTORY

Differences in financial performance between various categories of hotels in the Visegrad Group countries

“…Pereira-Moliner et al (2011) stated the same conclusion in a sample of hotels. The difference in hotel profitability was also confirmed by Dimitric et al (2019) who dealt with hotels in selected Mediterranean countries. Our findings complement the conclusions by Costa and Costa (2019), who confirmed the differences in financial health in the tourism sector and stated that hotels show better financial performance compared to the group of enterprises engaged in other tourism activities.…”

“…Pereira-Moliner et al (2011) as well as McNamara et al (2003) highlighted the possible causes of the differences, and the bargaining power of businesses can be considered as one of the main causes. Dimitric et al (2019) confirmed the difference in the profitability of hotels in selected Mediterranean countries (Croatia, Greece, Spain and Portugal) using indicators such as ROA, cash flow operating revenue, net asset turnover, solvency ratio, while their findings showed that the cash flow to operating revenue had a statistically significant and positive impact on profitability. Simultaneously, the authors emphasized the significance of the overall ratio of asset turnover to solvency.…”

Corona Virus Disease (COVID-19) and Other External Factors as Determinants of Accommodation and Restaurant Services in Kenya

“…Tourism plays a pivotal role to several countries. It is a source of foreign exchange, employment, infrastructure development, investments, innovation and enterprise development therefore becoming a vital driver of socio-economic advancement and poverty reduction [1,2,3]. The dynamics of the global tourism is swayed by external factors (globalisation, new technology, modernisation in transport and communications systems) as well as internal factors (new tourist demands and more flexible management) [1].…”

“…It is a source of foreign exchange, employment, infrastructure development, investments, innovation and enterprise development therefore becoming a vital driver of socio-economic advancement and poverty reduction [1,2,3]. The dynamics of the global tourism is swayed by external factors (globalisation, new technology, modernisation in transport and communications systems) as well as internal factors (new tourist demands and more flexible management) [1]. Tourism is expected to play a pivotal role in ensuring the Kenyan economy grows at the projected rate of 10% per annum up to the year 2030 and it can be noted that factors that included political stability, improved security situation, growth in the aviation sector, investor confidence, withdrawal of travel advisories, visits by foreign dignitaries, open border policy, hosting of international conferences improved Kenya's tourism performance in 2018 [3,4].…”

“…An examination by [1] on the profitability of hotels in selected Mediterranean countries indicated that the cash flow adequacy impacts on profitability of hotels. Total assets turnover and solvency ratio ware determinants in the selected countries with the exception of Portugal and Greece respectively.…”